The credit crisis of 2007 and 2008 has thrown much focus on the models used
to price mortgage backed securities. Many institutions have relied heavily on
the credit ratings provided by credit agency. The relationships between
management of credit agencies and debt issuers may have resulted in conflict of
interest when pricing these securities which has lead to incorrect risk
assumptions and value expectations from institutional buyers. Despite the
existence of sophisticated models, institutional buyers have relied on these
ratings when considering the risks involved with these products.